Freddie Mac

AAA

For today's chart we've chosen to take a look at Freddie Mac (NYSE:FRE) because it is trading within a symmetrical triangle pattern. As you can see from the chart below, the stock has been experiencing a period of sideways momentum since the drop that occurred in late 2007. The narrowing trading range is technically significant because it will likely be followed by a sharp breakout. Bearish traders will look for a continuation of the downtrend once the price moves below the bottom trendline. Conversely, bullish traders will watch for a bounce off the lower trendline and for a reversal in the trend. These traders would look to buy the stock when the price is able to get above the $32 level.

This chart is also a good example of how a gap will generally get filled before it continues in the direction of the dominant trend. Notice how the downtrend continued once the bulls tried to recoup the loss from the adverse news announcement that was released on November 20th (shown by the dotted line).

For more, see Playing The Gap

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